In Rocky Waters? The Secret About Qualifying For A Mortgage When You’ve Had A Bankruptcy In The Past.
It’s no secret that buying a home can be a difficult process, especially if you’ve had financial troubles in the past. A bankruptcy or foreclosure can easily disqualify you from getting a mortgage, leaving you unable to purchase the home of your dreams. There are a few things you can do to improve your credit score and financial situation, making yourself eligible for a mortgage.
Verify my mortgage eligibility (Dec 25th, 2024)It is important to understand the effects Bankruptcy has on your credit score.
Bankruptcy significantly lowers your credit score, signaling to lenders that you are financially unreliable and risky. While you may financially recover from a bankruptcy soon after filing, it is not immediately removed form you credit report. A chapter 7 bankruptcy remains on your credit report for up to 10 years, while a chapter 13 bankruptcy remains for up to 7 years.
In good news, you do not have to wait until your credit report is cleared to apply for a mortgage! Depending on the type of loan and bankruptcy you file there is a waiting period you must abide by. After the certain waiting period is up, you are free to apply for your loan.
Verify my mortgage eligibility (Dec 25th, 2024)The waiting periods for Chapter 7 Bankruptcies are as follows:
- Conventional: 4 Years (2 for specific circumstances)
- FHA: 2 Years (1 for specific circumstances)
- VA: 2 Years
- USDA: 3 Years
- Non-QM: No Waiting Period
The waiting periods for Chapter 13 Bankruptcies are as follows:
- Conventional: 2 Years from Discharge Date and 4 Years from Dismissal Date (2 for specific circumstances)
- FHA: 1 Year
- VA: 1 Year
- USDA: 1 Year
- Non-QM: No Waiting Period
Conventional Loan
To get approved for a conventional mortgage after bankruptcy, you need to meet the appropriate waiting period and demonstrate that your credit has been reestablished. This means paying bills on time while keeping low balances or no debt at all with revolving accounts such as credit cards.
Requirements: 2-4 Year waiting period, 620 minimum credit score, and 3% down payment
FHA Loan
The financial institution that you are applying for your mortgage with will require proof of positive credit history before they accept any applications. If the person filing has had their bankruptcy recently, then it is possible to get temporary relief from these rules so long as there have not been too many debts incurred since said Chapter 13 plan was filed or if permission has already been granted by court order ahead of time – but only after meeting certain criteria.
Requirements: 1-2 year waiting period, 580 minimum credit score, 3.5% down payment
VA Loan
VA loans are designed to help veterans get back on their feet. They often have easier standards when it comes the borrower’s credit history, which can be helpful if you’re trying after bankruptcy!
Requirements: 1-2 year waiting period, no minimum credit score or down payment
Verify my mortgage eligibility (Dec 25th, 2024)USDA
Backed by the US Department of Agriculture these loans are for people applying for mortgages in the qualifying rural areas. It is key to know that these mortgages only come in fixed-rate, 30 year terms.
Requirements: 2-3 year waiting period, no minimum credit score or down payment
Non-QM Loan
A Non-QM loan is an umbrella term for all home loans that are outside the federal guidelines. These mortgages tend to be on the more expensive and risker side with interest only payments or terms longer than 30 years. It is key to note that you can apply for a Non-QM loan immediately after bankruptcy, as they have no waiting period.
Requirements: No waiting period in some cases, credit score and down payment depend on your lender
When you are considering applying for a mortgage after bankruptcy, there are a few things to keep in mind.
Verify my mortgage eligibility (Dec 25th, 2024)1. Start by rebuilding your credit. This means paying your bills on time and keeping your credit utilization low. Your credit score plays a huge role in mortgage approval and lender requirements. Get a step up while you have the opportunity to.
2. Open new credit accounts and use them responsibly, this will help you rebuild your credit history and make you more appealing to lenders. It is important to demonstrate your ability to manage your finances.
3. Wait at least two years after bankruptcy before applying for a mortgage. This will give you time to rebuild your credit score and demonstrate that you are capable of managing debt responsibly.
Verify my mortgage eligibility (Dec 25th, 2024)4. Be prepared to provide documentation that proves you are now able to handle debt responsibly. This may include proof of income, employment, and/or rent payments.
5. Meet with a mortgage specialist to discuss your options and get pre-approved for a mortgage. This will show lenders that you are serious about buying a home and ready to take on the responsibility of a mortgage loan.
It may feel impossible to qualify for a mortgage after filing bankruptcy, but we’re here to let you know it is not. With the right credit techniques and research you can get approved! Give yourself the time, patience, and understanding to get your head above water and your credit score stable. Contact us to day to speak to a loan expert who fits your needs.
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